“Mind Mastery of the Loss”

Jan 24, 2010 

We have covered the mindset of losing before. This topic does warrant repeating because it’s so critical to all traders and styles.  In fact it also applies to athletes and Texas Hold’em card players, anyone who faces losing in any competitive situation can benefit from understanding the mindset. 

Losing is a Part of the Game – Master Acceptance but in small amounts.

Few occupations come with the everyday possibility of losing and accepting it. However, ones  social conditioning, surroundings and environment are overflowing with strong messages to succeed from birth, end up having a profound effect ones trading career.  Learning to master the mind set of losing is critical to a traders well being. A trader must take several steps to master this. First is to re-defining the meaning of loss, positioning the mind in a non-critical mode, then create of rules to reinforce disciplines and preserve cash, and finally view the loss as the best asset for ones trading perfection.  

From the time men enter the world and can read the “The Little Train That Could” parenting and surroundings guide them into prominent professions of perceived success, like doctors and attorneys, all demanding perfection. Years of schooling set the standard of being number one in sports and achievements. This constant repetitive environment for achieving, being right, not accepting loss and having the primary desire to win is a conditioning that has to be relaxed for accepting the lose in a different way. 

When one chooses trading as a career they are unaware of the impact of social conditioning. Soon as trading begins the challenges from this start to become very clear and can come back to bite the trader in the pocketbook. Installed beliefs, behaviors, experiences and hidden sub-conscious triggers have become  programmed into the mind. The mind and body has developed “auto-pilot” triggers and they now surface unexpectedly while trading forcing undesired actions within the trade entries, execution and exits. All this takes a direct attack on the “ego”.  Some traders, work through this over time, many don’t survive, and just add to the dropout statistics. Non-mastery of emotions is the major reason so many will fail in the business.  This trading lesson answers the WHY, and more importantly HOW to over come it with a variety of solutions.  Experienced traders will appreciate the definition of this concept and new traders should take heed! 

Mind Mastery of the Loss. High-end traders have one thing in common. They have learned to redefine the meaning of loss and accept losing as part of the game. There is not one trader I have come across and who has succeeded that doesn’t have a “war story” of losses.  In fact, many have experienced enormously large losses. Once this happens there seems to be a common thread of sanity that overcomes them. The trader goes through a metamorphous. They first make the solid decision they will do anything to succeed. Second determination explodes and “D–isciplines” are created in a new set of rules I define as “must never do again,” or else.  Focusing on mastering the disciplines  can improve the chance of reaching prosperity and success. Losing becomes the right of passage, to wealth. 

Here are some steps to attack this. 

1) Redefine the meaning of losing. And complete the “Action Exercise” below.  When you look at losing in a different way it helps to minimize the emotions it stirs up. You have to work to let go of your old definition. 

2) Decide and make the solid RULE that if you have a losing trade you will stop and review it BEFORE taking the next trade. 

3) Take the opportunity to think in your mind that by reviewing the loss it will bring you something new in the trading strategy or implementation. This is your opportunity to learn something new a way to “tweak” the approach and fine-tune the next trade. 

4) Learn to manage daily losses keeping them to a minimum.  Ask “What amount can I lose where I will not be emotionally upset? What amount can I let go of where I don not bring it to the trading the next day? That’s where your limit is for now, that can be changed later as you progress. The goal is to stay emotionally balanced. Many who fall pray to the emotional impact of losses, experience blows to the ego, low self esteem, insecurity, uncertainty and many times paralysing fears. 

To make things change one needs to take immediate action. Here is your action plan for the exercise: 

Action Exercise:

• Take one page of lined paper. Write one answer per line an answer the question. “What’s great about losing?  You MUST fill the page. Re-Read this each day till it feels true to you.
• Make sure you immediately review the trade right after the loss.
• Define the new approach before you take the next trade after a loss.
• SIM trade the new approach until it works and you put  cash on the line
• Keep a journal of the trade stats
• Determine your maximum lose limit for the day – Where you stay  emotionally balance 

Till next time, Great Trading!